Retirement savings is a crucial milestone, yet a substantial number of Americans fall short of the recommended balance. According to Northwestern Mutual, the average retirement savings across all age groups stands at $89,300, with those in their 60s averaging around $112,500. This figure is concerning, especially for those nearing retirement age, as it indicates a strong reliance on Social Security to cover essential expenses.
If you find yourself approaching retirement with limited savings, there are several strategies you can adopt to increase your Social Security benefits, providing more financial stability in your golden years. Here’s a look at some effective ways to maximize your Social Security payouts.
Work History
The Social Security Administration calculates benefits based on your highest 35 years of earnings. If you fall short of this period, those missing years will count as zeroes in your record, which can reduce your monthly benefits. Thus, completing as close to 35 years of earnings as possible is essential, especially if you’ve had career gaps.
While early retirement might be appealing, working until you achieve a 35-year history can pay off significantly. Even part-time work can fill in a year of missing earnings, which is helpful if you’re near retirement but have only 34 years of work history. For example, if you’re 65 with 34 years of earnings due to a career break, part-time work can prevent a zero from being averaged into your calculation, ensuring a higher monthly benefit.
Earnings Record
Accurate earnings records are essential because the SSA calculates your benefits based on your reported income. Mistakes in your earnings history can lower your monthly benefit, which is why it’s crucial to verify your records regularly.
You can check your Social Security earnings record by creating an account on the SSA’s website. If you observe any discrepancies, such as missing or underreported earnings, report them immediately for correction. Fixing errors early on can prevent you from receiving a lower monthly benefit upon retirement and will spare you any potential headaches later.
Benefits
While you can claim Social Security benefits as early as age 62, waiting until 70 can significantly boost your monthly benefit. The Full Retirement Age (FRA) is currently 67 for individuals born in 1960 or later, but for each year you delay your claim beyond your FRA, your monthly benefit increases by about 8%.
For instance, if you’re eligible for a monthly benefit of $1,800 at 67, delaying until age 70 could raise your benefit to around $2,232 per month—a substantial increase that could make up for a lower retirement savings balance.
Although delaying Social Security benefits may not be feasible for everyone, working part-time during this period could ease the financial strain, allowing you to delay benefits while still generating income. For many, the boost in monthly benefits from waiting is worth the additional years of work.
Final Thoughts
Given the average retirement savings of many Americans, maximizing Social Security benefits is critical. Building a 35-year work history, regularly checking your earnings record, and delaying benefits until age 70, if possible, can help increase your retirement income. By implementing these strategies, you can better position yourself for a more comfortable and financially stable retirement.
FAQs
How many years of earnings does Social Security consider?
Social Security calculates benefits based on your highest 35 years of earnings.
What happens if I don’t have 35 years of work history?
Any missing years count as zero, reducing your Social Security benefits.
How do I verify my Social Security earnings record?
You can verify your record on the SSA website by creating an account.
What is the benefit of delaying Social Security until age 70?
Delaying increases benefits by approximately 8% per year up to age 70.
Can part-time work help increase Social Security benefits?
Yes, even part-time work can contribute to your earnings record.
